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kiecker law what happens to my kids of i die

What Happens to My Kids If I Die?

In the past we’ve quoted a survey from Caring.com. Each year they do a survey gauging how many people complete their will. Frankly, the results are staggering to us. This month we’re going to be focusing on younger families, and more specifically what happens to kids when their parents die. Looking at the 2020 survey that Caring.com did, only 27.2% of people they surveyed between the age of 24-54 have a will (and it’s even less in the 18-23-year-old group). This is the chosen age group as this is the group that is typically going to have minor kids. We can assume those statistics are likely the same whether you have kids or don’t. That means almost 75% of people are going to leave it up to the courts to decide what happens to kids. The question we have is, is that really what you want, or do you want to decide what’s best for your kids?

Later this month, we will tackle what happens if you don’t have a will, but first let’s talk about what your will can and should do for you in deciding your children’s future if you’re no longer here to care for them. The first thing you will want to do is determine who the guardian will be for your kids. That’s probably self-explanatory, but that just means, who are your kids going to live with and who is going to care for their physical well-being. This is probably a question that you want to consider for more than just a couple of seconds. Many times, people will want to name their parents (i.e. the grandparents) as the guardians. At first blush, that may seem to be a good choice, but you will also want to consider whether your parents WANT to have a 2,5,8, or 10-year-old living in their house full-time? Or for that matter are your parents ABLE to care for a child full-time? Grandparents love to have their grandkids for an evening or even a couple of days, but could they handle having kids on a full-time basis?

Another thing to keep in mind is the style of parenting that you have versus what a potential guardian has. You want to make sure that your kids will be raised in a way that you are comfortable with. If you are strict with your kids, you likely want someone that is also going to have rules. Lastly, and maybe most importantly, remember this decision is about your kids. It’s not about the feelings of your parents, siblings or in-laws. It’s about your kids and what’s best for them. Many times, people feel an obligation to “keep things equal”. It’s not about keeping things equal. Your kids and how well they are taken care of is the only thing that matters.

The other part to consider is the financial side of things. You may be comfortable with the person that you name as guardian handling all the money, but you may not. If, for example, you name your sister as the guardian because she is such a good caregiver for her own kids, but you wonder if the money you leave for your kids will be spent wisely, you can name another person as a trustee. There could be a lot of money that is left to your kids in the form of proceeds from your house, life insurance or retirement accounts. You want that money used to care for your kids, not for frivolous expenditures that benefit your sister or her kids. If you want to have a fail safe in there so there isn’t even that temptation, you can name a trustee.

So, what does a trustee do? Essentially, your will sets up a trust for your minor children in which they get all the money that is left to them at a certain age (maybe 18, 21, 25 or any other random age you decide makes sense). In the meantime, your kids will need money for the every day things that they encounter such clothes, sports, food, school trips, or any other number of everyday necessities. The trustee would work along with the guardian to make sure that your kids’ money is being spent wisely. In other words, your sister that is the guardian would need to check in with the trustee before they can spend the money. It’s the best of both worlds. Someone that is going to be a good caretaker for your kids, and you can be sure that you have someone that is good with money to make sure your kids are financially cared for. 

Parents do everything they can to care for their kids physically and financially.  There is no reason that should stop just because the parents have passed away. A will is the legal structure of a plan that goes beyond your life.

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kiecker law what happens if I don't have a will

What Happens If I Don’t Have A Will?

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Posted by Kiecker Law on Wednesday, April 22, 2020

What Happens If I Don’t Have A Will?

Over the past month or so, we’ve talked about what a will is, what a will does to protect your stuff, and what your will does to take care of your kids. In February, we even talked about going through the probate process. Now, we’re going to take it one step further. We’re going to talk about what results when you don’t have a will and you need to go through the probate process. 

The first thing that happens when you don’t have a will is that you end up in a lengthy probate process. This probate process will be expensive, and it will be painful for your family. A large sum of money will be eaten up by attorney and court fees and not be given to the heirs that you want. Once you get past the fees taken out of your estate, the courts will use the Table of Consanguinity (pictured) to determine who gets what in terms of your stuff. You won’t get to decide who gets it and it could be that someone inherits your hard earned money that you don’t want to. It’s all based upon a table that was developed in the 13th century.

That charity or your church that you wanted to receive a large donation…that doesn’t matter. They won’t get it. That nephew you wanted to support because he helped you out…he won’t necessarily get it because he isn’t named specifically. The court will decide who gets what.

For those of you with minor children, the more important question is what happens to those children. This is where the chaos begins. At least with your stuff, there is a standardized process to follow. When it comes to who takes care of your kids, there is nothing. The courts and other governmental agencies decide what happens with your kids. They will take a look at your family’s situation decide what they think is best. Of course, they will take your family’s opinion into account, but when all is said and done, the court decides the future of your kids.

Unfortunately, what often times happens is that differing sides of the family have different ideas on what should happen. The husband’s parents may think the kids should come live with them and the wife’s sister may think that she should care for the kids or some other scenario like this. This often leads to large arguments between families and certainly leads to negative effects on the kids. Yes, everyone loves the kids, but the kids are the ones that are caught in the middle. Depending on how old your kids are, they are going to be caught in the middle of it at least until they are 18-years-old. 

In these situations, no one tries to put the kids in the middle, it just ends up happening as everyone thinks they know best. It’s not intentional by any means, but it’s what happens all too often. This worst-case scenario is why we suggest that everyone makes sure they complete their estate planning. It’s not fun, and not necessarily an easy process, but it’s worth it when your family needs it.

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Kiecker Law Last Will and Testement

What Happens To My Stuff?

One of the two main functions of your will is to determine who gets your stuff. Now, when we say stuff that means everything from your house to your car to your business to your investments and all the way down to the $2 knick knacks you have sitting on that shelf on the wall. Some of these things will have a high value and some of them are worth mere pennies. Some of them have tons of sentimental value and some of them don’t. Your will decides how to split them up. As an aside, many of these larger items in terms of monetary value can be taken care of with the appropriate deeds and beneficiaries, but anything that is not covered by a deed or beneficiary will be taken care of in your will.

Within your will you can decide how your stuff gets split. Some people may say that they just want their possessions to be split evenly between their kids. Alternatively, you may want to treat your kids differently. Maybe one of them helped you much more than the others and you want to financially reward them. Your will is the place to do that. If you want your church or a charity to share in your wealth, you would name them in your will. 

What Happens if I Die Without a Will?

Now, you may say that you just don’t care how your stuff gets split up. Honestly, your kids or heirs may not care either. Unfortunately, that’s not generally what happens. What seems to happen more often than any of us would like to admit is it starts family fights. When there is a fight, it generally doesn’t end well. You see, a fight needs to be settled by someone (ie a judge in a courtroom) and you also need to have someone fight along with you (an attorney). Both of cost time and money. All that wealth that you worked so hard to build up ends up in the hands of people other than those that you want. Those arguments may be avoided by properly writing your will within your estate plan. Yes, hiring an attorney to write your will costs money, but we can assure you that the cost for a will is less than the cost to fight over it!

So What Happens to My Stuff When I Die?

So, what goes into writing your will so that the right people get your stuff? Frankly, writing it is the easy part. Deciding the best course of action through thoughtful decision-making is the hard part. If you’re giving your wealth to your adult children, you likely know their personalities better than anyone else. It’s your responsibility to decide whether they are able to handle receiving a large sum of money or if it will be spent in ways that you don’t approve of. You can decide that they get their payout at a certain age or if they get it right away. 

When you decide to write your will, this is the area that you will spend the most time on. It’s important to not only write your will, but to also do it correctly. The worst thing that you can do is not put thought into it and cause more problems that you solved. We can’t stress enough that working with an attorney (even if it’s not us) is essential. When you do, you have a resource that can draw on the knowledge of what other people have done and what tends to work the best.

Contact Kiecker Law

Contact Kiecker Law to get started on your estate succession plan today.

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will

What Does a Will Really Do?

What is a will and what does it do? It sounds like such a simple question. It should be, but the details often get lost in emotional discussions such as estate planning. As a law firm, we sometimes forget that what is an everyday discussion for us and that we take for granted is not a normal thing for others to talk about. Whether you haven’t every talked about your will or you have done all of your estate planning, reviewing what a will is and what it does is a good idea.

What is a Will?

To put it plainly, a will is a legal document that answers two main questions:

  1. What happens to your stuff?
  2. What happens to your kids when you aren’t there to protect them?

Like mentioned above, we sometimes take these conversations for granted, but it can be a difficult conversation.  Not only do you have to ask yourself difficult questions that you may not know the answer to, but you have to admit your own mortality. Needless to say, that’s not fun. In fact, it can be downright scary. We don’t mean to give any more excuses to put off your estate planning any longer, but we find that there is no use sugar coating it to make our clients artificially feel better. In fact, you probably should feel a bit uncomfortable in making decisions that are so consequential to the people you most love. They are difficult, but important conversations and the worst thing that we and you can do is pretend that they aren’t. It’s OK to be scared. It’s OK to even be a little intimidated. That’s where your trusted advisors come in.

How to Write a Legal Will

The right attorney will guide you through that process. Like we mentioned before, we have these conversations on a daily basis. As a client, you can and should take advantage of that. Every person’s situation is different, but there are very few types of situations that your attorney hasn’t seen. You have the ability to use that knowledge and experience to your advantage. That is why you want to be comfortable with the attorney you choose to work with. We would love to say that Kiecker Law is the best firm for everyone (and, in our minds, we are), but even if we aren’t we want you to have comfort in knowing that your wishes are going to be honored.

Writing a Last Will and Testement

So, in a very brief way, we answered the question. What is a will and what does it do? Yes, it’s a legal document and decides where your stuff goes and what happens with your kids. We just talked a little bit of the process of what it takes to write a will, but in the next couple of months we will talk more specifically about the questions a will answers. We’ll talk about how we decide who gets your stuff and some things you might want to take into consideration. We’ll talk about what happens to your kids (if they are minors) and some things you want to keep in mind while making that decision. And we’ll talk about what happens if you don’t write a will. Throughout it all, we’ll give you a few thoughts on how we do things and some things that you might keep in mind regardless of what attorney you work with.

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probate lawyer

What Is Probate? Part 2: Good Probate

In our last blog we talked about “THE BAD PROBATE”. This time we want to shift gears and look at “THE GOOD PROBATE”. Again, we’re not here to pull the wool over your eyes. There is no such thing as a fun probate process. There are just really painful ones and less painful ones. In fact, if done correctly, your estate won’t even need to go through probate. The correct planning and documents will transfer ownership of your possessions without any court proceedings at all.

The less painful methods have all your instructions laid out about what you want done in your estate plan. It lets your loved ones know who should get what. It lets them get more of what you have built up. And it helps them avoid court rooms. So, you may ask, what does your estate plan include and how does it accomplish these things?

Wills, Trusts, and Deeds

We talk about a will and a trust. Your will guides your executor (the person you want to handle it) to know who should get what. Don’t get us wrong, the government does have a plan set up for you, but you must go to court to get everything approved and that costs money. If you have a will, your plans are already known so a judge doesn’t have to decide whether it is fair or not. It doesn’t matter whether it’s fair, what you want to happen is the only thing that matters. You get to decide who gets what and when they get it (specifically if you have children).

In certain scenarios, you may want to have a trust. Some scenarios that could drive you needing this are the size of your estate, whether you have a special needs child or if you want to gift a sum of money to a charity in a specific fashion among other things. If privacy is important to you, a trust may keep what’s happening within your estate private so only your family (and a few select court officials) know what is happening with your affairs.

Probate and Estate Planning

As we always say, a good estate plan also includes a financial power of attorney and a health care directive. In terms of worrying about a probate, neither of these documents will have an effect, but we feel it would not be responsible for us to leave them out when discussing estate plans. They are useful tools that should be considered.

Additionally, you’ll want to make sure that you’re using the proper deeds for your real estate. A fantastic tool that you can use within real estate is a Transfer on Death Deed, or a TODD. What this type of deed will do is automatically transfer your house or any other land to the correct person or people when you pass away. Again, you don’t need to worry about going to a probate court for them to decide that what happens. It’s already known by using this document. It’s very helpful and it’s certainly less expensive than going through the probate process.

Should I Consult a Probate Lawyer?

Something that isn’t often spoken about is making sure the beneficiaries on your retirement accounts and life insurance are properly listed. Often times, people just put a name down. In all actuality, they should be working in conjunction with their will and/or trust. The language to use is specific to you and can also save a lot of headache.

Essentially, there are a lot of tools out there to help you pass along your possessions without having to deplete the value for your loved ones. We strongly encourage everyone to go through the process of planning and reviewing their planning if you have already completed it. A little bit of pain for you now will prevent a lot of pain for your loved ones later.

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probate law

What Is Probate? Part 1: Bad Probate

What is Probate? Probate is simply a legal process that any estate with an asset worth more than $75,000 must go through. Inevitably, you’re going to hear from Forbes and Motley Fool and The Wall Street Journal and your preferred regional newspaper about how horrible it can be. And, we’re not going to lie to you, many times it is horrible.

We don’t believe in pulling the wool over your eyes. We want you to make the most informed decision that you possibly can. That’s why we’re going to explain to you what can happen if you don’t do appropriate estate planning. And then we’re going to explain what you need to do to avoid making probate a difficult, expensive and painful process.

How Much Does Probate Cost?

Let’s start out by explaining the why. There is no hard and fast answer to how much probate costs. We’ve seen estimates from as low as 2% to as high as 10% of your estate.

That may not seem like a lot on it’s face but remember that includes all your assets that don’t have beneficiaries listed on them. So, that excludes things like your IRAs, 401(k)s and life insurance. What it includes though is your house, any land you own, any stocks that you own, your cars, and any of your personal property.

Probate Court

Again, that may not seem like a lot, but it WILL start adding up. Take for example this scenario…. the median cost of a house in the state of Minnesota is roughly $250,000. Depending on where you live that could be substantially higher or lower, of course, but we’ll use that as a starting point. Add in your two vehicles at $15,000 each and the value of your personal property (jewelry, lawn equipment, clothes, etc.) at roughly $50,000. Assuming you don’t have any bank accounts or investment accounts of any value, your estate is suddenly worth $330,000.

Between court fees, attorney fees, executor fees and various other expenses, your estate could be reduced by between $6,500 and $23,000. Now, depending on where you’re at in your life, that could have some pretty sobering effects. If you have minor kids, that means they will get that much less to support them. If you’re plan is to donate your money to charity or church, they will get that much less to do their good deeds. Whatever it is you want, the person or people that you want to benefit, will get much less benefit. Add to that, there’s always the potential of infighting about who should get what and it doesn’t lead to a pretty picture. You can calculate the size of your estate on your own and use this chart to approximate the cost of your own situation.

Probate Cost Chart

Value of EstateLow RangeMid RangeHigh Range
$50,000$1,000$2,500$3,500
$75,000$1,500$3,750$5,250
$100,000$2,000$5,000$7,000
$150,000$3,000$7,500$10,500
$200,000$4,000$10,000$14,000
$300,000$6,000$15,000$21,000
$400,000$8,000$20,000$28,000
$500,000$10,000$25,000$35,000
$750,000$15,000$37,500$52,500
$1,000,000$20,000$50,000$70,000
$1,500,000$30,000$75,000$105,000
$2,000,000$40,000$100,000$140,000
$3,000,000$60,000$150,000$210,000
$4,000,000$80,000$200,000$280,000
$5,000,000$100,000$250,000$350,000
$6,000,000$120,000$300,000$420,000
$7,000,000$140,000$350,000$490,000
$8,000,000$160,000$400,000$560,000
$9,000,000$180,000$450,000$630,000
$10,000,000$200,000$500,000$700,000
$15,000,000$300,000$750,000$1,050,000
$20,000,000$400,000$1,000,000$1,400,000

That may not be fair, but that’s the reality. This is what we call “THE BAD PROBATE”.

So, now that we have also sufficiently worried and scared you, what can you do? Like we said, it doesn’t have to be that way. Proper planning and continual planning will help to avoid some of those headaches. So, what does that mean?

Avoiding Probate

Proper planning is different for every person and family. To start out with, you need to get all your estate planning documents in order. This is going to include a will and maybe a trust. A good estate plan will also include a financial power of attorney and health care directive. They won’t do anything in terms of the probate but should be included. Depending on your situation and your goals, you may also need to have a trust. Additionally, you’ll need to make sure that all the beneficiaries on your life insurance and retirement accounts.

Additionally, you should review your plan every 3-5 years to make sure it still meets your wishes and evaluate your current situation. You may or may not need to change anything, but, at the very least, you should review it.

Again, probate can be a scary process for those you leave behind. It doesn’t have to be though. Leaving instructions for what you want done should make you sleep easier at night. You can know that your wishes will be known and followed, and you can also know that you’ve made things easier on those you care most about.

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real estate law

Farm Estate Planning

Everything about farmers is unique. Farming is unlike any other business. As many farmers will say, farming is not just a job, it’s a way of life. That means that farming is a way of life through thick and thin. With farming you don’t just go to work and go home when the job is done. You live at your job. You live in the same place you work. But the truth is, most farmers would never change their way of life unless they absolutely must. In addition to that, they want to pass it on to their kids. And they want their kids to pass it on to their grandkids. Or, at the very least, they want the land to stay within the family.

Farming Finances

The finances of farming are also very unique. Often the assets of a farm far outweigh the income of a farm. Speaking from an estate planning perspective, this creates a unique estate planning situation. According to the USDA’s Census of Agriculture, the state of Minnesota in 1997 had 78,755 farms. In the latest census in 2017, the state had 68,822 farms and this number keeps shrinking.

Aside from the obvious that more and more people are leaving the profession, it also means there is a lot of wealth transfer that has happened over the last 20+ years. Additionally, the average age of farmers is 58 years old according to the same census. That means there will be a lot more wealth transfer in the coming years.

Watch This Month’s Video To Learn More

Kiecker Law Video Series Ep. 2 – How Do I Transition the Farm to my Children?

Estate Planning for Farmers

When we talk about estate planning in farming, there are so many factors to consider. Everything from the amount of land to the value of the machines to the amount of cash in the bank to which, if any, kids want to take over the farm to how you want to divide up the assets and money. In a certain sense, this is just like any other business owner. In another sense, it’s completely different. Again, farmers are unique.

As mentioned before, farming isn’t just a job. It’s a way of life. If you want to pass the farm on to one kid, but not the other, the estate plan could be written many different ways. You may want all the kids to be treated the same financially, but that means the estate plan must be written a specific way. If you want the kid that is taking over the farm to be treated differently than the others, you must write the estate plan in a different way. If you want to give the farm away, you can do that, but you need to do it a specific way.

Succession Planning for Farmers

So, what does that mean? It means that there is no one-size-fits-all answer. It means that when you’re considering the succession planning of your farm, you need to be aware of all the options that are available. There are many different outcomes that you may want and there is likely a way to accomplish each of those. Each one of those solutions is unique. Proper planning is essential to accomplishing the outcome that you desire.

To be sure, the legal system has set up a plan for you if you don’t do your planning. Likely, no one will be happy with that one-size-fits-all solution. It will likely lead to many arguments and many people that are upset with each other. Again, we know farmers are unique. We know that each situation is unique. Make sure that your plan is also unique. 

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starting a business in mn

Preparing To Sell your Business

In November, we celebrated National Entrepreneur’s month across the country. It’s a great time to celebrate the successes you may have had an entrepreneur or those successes of your family or friends. As the year comes to a close, many businesses look towards planning for the upcoming year(s). In that same vein we thought it would be helpful to look at something that many business owners often overlook: Getting ready to sell your business. Even if you’re not currently thinking about selling your business, it’s important to start preparing and take the right steps to get you ready. In fact, many of the steps are best practices for businesses no matter how old they are.

While it’s a bit old, Entrepreneur magazine had a fantastic article on what steps you should take to make sure you’re prepared. Inevitably, your business will have additional steps you need to complete, but this is a very good basic start:

  1. Get a business valuation
  2. Get your books in order
  3. Understand the true profitability of your business
  4. Consult your financial advisor
  5. Make a good first impression
  6. Organize your legal paperwork
  7. Consider management succession
  8. Know your reason for selling
  9. Get your advisory team in place
  10. Keep your eye on the ball

As you can see, many of these things are best practices that every business should be doing regardless of the stage the business is in.

We recommend that the first thing you do is to put together a good team to work on your behalf. Most likely you’ve got these people already available to you and are already working with them. The three key people are your accountant, your attorney, and your personal financial advisor. You want those three people to work as a team for you. They each will be able to help you with parts of your preparation for a sale, but you most likely don’t have a financial planning, legally trained accountant.

Often times one of these steps will lead to another and your team will need to work together. For example, as your accountant is developing the valuation, the way that your company is structured can have a significant affect on the value of the business. How well you have kept your corporate records can change the type of sale you will be able to complete. Will it be a stock purchase or an asset purchase? Are you in good standing with the state and have you filed your meeting minutes with the state if you are an LLC? You may also want to look at any contracts that you may have and how that positively or negatively affects the valuation.

Once you do get that valuation, you’re going to want to understand how that will affect your personal finances. You will want to make sure that you have the appropriate accounts in place and strategies for what to do with the money that you have worked so hard for. We don’t bring all of this up to scare you, we bring it up because this is our area of expertise. You have worked hard to build your business and that is your expertise, but we strongly suggest working with people that know all the rules, regulation, tips and tricks when it comes to selling a business. You have trusted advisors that work in this field, it’s worth it to use them to make sure you get the best result possible.

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starting a business in mn

Legal Issues for Business Owners

This month, Kiecker Law is celebrating National Entrepreneurs Month. A couple of weeks ago, we talked about what goes into starting a business from a legal standpoint. Today, we want to talk about other legal issues for business owners. We’ll talk about two main topics: keeping your legal structure up to date and the contracts you use within your business.

Keeping Your Legal Structure Up to Date

What do we mean by keeping your legal structure up to date? Assuming you set up a legal entity, the state requires you keep your records up to date and renew your business filings on a yearly basis. Essentially, that means that you need to have meeting minutes xxxxx, and xxxx for you to be considered a legal functioning business. You also need to file an annual renewal with the State of Minnesota.

So, what happens if you don’t file the necessary paperwork? Essentially, the State of Minnesota will dissolve your business entity and will no longer recognize you as a business. That means that someone else could file paperwork for a business of the same name and they would have rights to your business name and all the protections that go along with it.

Next month, we’ll talk about how not having the appropriate paperwork filed can affect you when you’re ready to sell your business. It’s safe to say, that it is in your best interest to make sure that you are keeping your business filings up to date with the state.

Business Contracts

The other part the legal aspect of your business that we want to discuss are the every day contracts that you agree to and use. Inevitably, you will be asked to sign contracts to do business with other companies. If you own a retail store, one of your vendors may ask you to sign a contract that allows you to be the only seller of their products in a 30 mile radius. That may seem like a great deal, but when you get something you’re always asked to give something up as well. Those contracts may prohibit you from selling certain other products as well. Is that really something that you want to agree to? Or maybe the vendor requires you to provide prime shelf space. Is that really the best thing for your business? As they say, the devil is in the details on these types of contracts and often times you will be required to give up something that you do not really want to. It’s essential that you carefully consider all of your options before signing a contract.

Another scenario might include you growing your business so much that you need to add on to your building. If so, that’s great, but you’re likely going to want to hire a construction company or contractor. In that case, you may want to add deadlines for when things need to be done by or your business could be more adversely affected that you are willing. Again, reviewing those contracts is essential. Many times it’s in your best interest to have an attorney review them first just to make sure the contract is saying exactly what you want it to.

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starting a business in mn

Starting A Business in Minnesota

November is a celebratory month for small businesses. November is National Entrepreneur Month as declared by former President, Barack Obama. According to the US Small Business Association there are 30.2 million small businesses as of 2015. Those small businesses employ 58.9 million people across the country. That means almost 50% of all people working in the United States are employed by a small business. Getting right down to it, small businesses drive the economy in the United States. It doesn’t matter what sector of employers, small businesses play a part. It could be health care or construction or services or retail or any other business you can think of, small businesses affect the world. Most likely, you or someone close to you is a business owner and should be very proud of what you are building. Business owners are a key cog in our society and need to be protected.

That’s why this month is a fitting month to talk about how those businesses, or yours, is legally structured. You may ask, “what does that matter?” Well, it can play huge role in how your business can be affected. Let us explain….

4 Types of Business Ownership

Let’s start out by saying there is no “wrong” way for your business to be structured whether it is a sole proprietorship or partnership or LLC or corporation. The reality, though, is that there are good and better ways for business to be structured. Today, we’re going to focus on Limited Liability Corporations (LLCs) and Limited Liability Partnerships (LLPs) and why they are usually a better structure than a sole proprietorship or partnership. There are a litany of reasons including tax advantages and ownership flexibility. The most important reason, quite frankly, is the reduced personal liability that you, as a business owner hold. By changing the legal structure of the business, you can shield you and your family from catastrophe. In a sole proprietorship or partnership, the owner is considered one with the business from a legal standpoint. What that means is that anything that happens in the business, the owner is responsible for and, in the litigious world we live in, that can be a dangerous set of circumstances.

Business Liability Examples

You may say that there is little or no liability in your business, but we’ll walk through two examples in two different industries.  

Let’s start with a small financial services firm. Suppose you give some advice to a client to purchase a stock or investment. That investment turns out to be a bad purchase and your client ultimately blames you and decides to sue you. Yes, you should have insurance and you probably do, but what if your insurance company decides that they don’t cover this particular scenario? What if your insurance company decides that you should have known better and won’t pay a claim? If you ultimately are found responsible, an LLC shields you from having your life savings taken for a simple mistake. The LLC would be liable financially, not you personally.

Another scenario might entail a retail business, say a paint store. Now, you might say, what kind of liability could a paint store possibly have? Well, we live in Minnesota. In many cities, retail stores are required to shovel the sidewalks outside their business or leading up to their business in the winter. If the sidewalk happens to not get shoveled as quickly as you want and someone slips on a patch of ice, falls, hits their head and suffers traumatic injuries that put them in the hospital for 2 weeks, who pays for the medical bills and, inevitably, the pain, suffering and loss of wages of that person? Most likely insurance, but what if it doesn’t? Your business likely would. The question is do you want to risk your personal wealth or do you want to limit it to the business?

Understandably, many people will say that those are far fetched examples and it will never happen to them. We would point to large businesses that employ many attorneys on their staff. Many of those large businesses feel so strongly about this, they require anyone that any vendors or contractors that they work with to have a legal entity.

What is The Best Form of Business Ownership?

Each individual business is different. We’re not saying that an LLC is the only way to go. Your situation should be evaluated by an attorney to help you decide what makes the most sense for you. Our hope is that you take the necessary steps to protect you and your business.

Happy National Entrpreneurs Month!

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